We all know someone that doesn’t save a dime. Maybe that’s you? The reasons people cite for putting off saving are many. There is only one problem with all of these reasons. No matter how good your reason is, your future self won’t accept it. The best reason in the world won’t help you pay your bills when you are older. That really good reason of yours won’t provide long term care for you when you become sick. It won’t pay the landlord when he comes pounding on the door. Grocery stores won’t take a good "reason" in lieu of money for groceries. So, first things first. Let’s get all those reasons out on the table. Once we have all the good ones identified, we can begin to brainstorm solutions for getting past each reason and get you on the path to saving.
1. I don’t have a job
Yeah, this is a pretty darned good excuse. If you aren’t working, you really can’t save. The only thing you can really do in this situation is look hard for employment. Network with people you know. Ask them if they know of any jobs, or know someone that might. Talk to recruiting agencies. If things are getting desperate, consider doing day laboring to start getting some money in the door while you work to find a job that is right for you. The bottom line is you need to actively search for positions. Submitting resumes is really not enough these days. It takes a lot of perseverance and you should exploit every possible angle.
2. I don’t have any money
Why don’t you have any money? Are you earning income? If so, you have money, you are just having to make choices about where that money goes. In many cases you might have more bills than you have income. Take a long hard look at those bills. (See number 3).
3. My bills are higher than my income
So, you aren’t bringing in enough money to pay all of your bills. It’s time to start making some sacrifices. Take all of your bills and categorize them by "fixed", "variable" and "optional". Your fixed bills are the things you can’t change easily. Your mortgage, your health insurance etc. While they appear to be non-negotiable, you do have choices. Can you get a better mortgage at a lower rate with a smaller payment? Should you move? Can you shop for cheaper health insurance? Should you change your deductibles? You get the point. Variable expenses are much more fluid. Do you absolutely need these things every month? Variable expenses might be things like cable tv, high speed internet, home phone service, cellular phone service etc. This is where you can usually make some improvements. Can you opt for a less expensive cable tv package? How about just getting the very basic channels? Is there a slower internet service in your area that is cheaper? Have you called your internet company to see if they’ll lower your price when you threaten to leave? Do you need both home phone service and cellular service? Consider dropping one. Do you need a cel phone? Maybe not. The point here is that while they seem like "must haves" there is often alternatives, or you might be able to do without. That brings me to the "optional" bills. Things like this are Tivo, Netflix, dining out, newspapers etc. If you lived in a third world country, you wouldn’t even have access to most of these optional type expenses. Can you live without them? You bet you can. The trick here is to be very honest with yourself about what you absolutely need. This doesn’t have to be permanent. Get rid of these until you get caught up and start saving for your future and then bring them back one at a time as you can afford them.
4. I want to enjoy life while I’m young
Who doesn’t want to enjoy life while they are young? It’s important to set some personal boundaries about what fun means. Maybe you have evolved your taste so much that fun to you means extravagant purchases at the department store and $200 meals in restaurants. The measurable difference between a $200 meal and a $40 meal is very small, if it’s even measurable. $300 pants do not bring you 10 times more enjoyment than the $30 pair. The strategy here is to start being honest with yourself. If you believe you must hemorrhage money while you are young to enjoy life, then you are missing out on some pretty basic human satisfactions. The key on this is moderation. Just like the motto of this website, the goal is to live life for today while planning for tomorrow. You can do both. It’s not that hard.
5. Why save for a day that may never come?
You’re right. You might not even make it to retirement. Are you married? Do you have kids? The chances of none of you making it to an old age are slim. Shouldn’t you plan a bit for them? What if you make it to an age where you can’t retire, but your life might be eased by having a nest egg to draw on in a crisis? You aren’t saving everything until you are sitting in a rocking chair. A huge reason to save is to begin to have your money working for you, instead of just working for your money. That old saying that "It takes money to make money" is pretty darned true. Look at it this way, if you are able to amass $100,000 in 20 years, at the end of that time you could supplement your income by $8000 per year by getting 8% interest on it. That’s a pretty decent raise. By the time you reach $100,000, I think you’ll find it makes even more sense to roll that interest back in and generate even more of a nest egg. The fact of the matter is that amassing wealth gives you options. Not amassing any wealth and spending for the day robs you of options.
6. I don’t make enough money
Fair enough. There are a ton of people in our country that aren’t making enough money. The only person that can change this is you. Have you looked at finding a new job? If you don’t have the skills, can you find any training opportunities in your area to improve your skills? Look around you. Are the people that do make more than you doing work that you could do? Talk to them. Ask them how you can get in to their line of work. The better you are at building relationships, the easier it will be to find help in this area.
7. I’m really busy. I’ll get around to it later
Tomorrow is coming a lot faster than you think. There will never be an optimum time to start. You have to take a few minutes to start drafting a plan. Are you saving through your job? If not, this is the easiest way to start saving. Call your HR rep, or your manager and ask them how to start. It’s usually just a phone call away. Call your bank, or even better, find a credit union, and ask how you can set up an automatic transfer from your main acct to a savings acct. Go to Etrade.com or schwab.com, or any number of online brokerage companies and see what it takes to open an acct. Worst case scenario, just call their 800 number and talk to a representative. They’ll help you get started.
8. I deserve to have some luxuries in life
Don’t we all deserve a few luxuries in life. Rather than look at luxuries as a god given right, how about looking at them as rewards. As you start improving your financial situation, consider using a small percentage of your income to reward yourself. The key here is that your rewards should be much smaller than your accomplishments. If you save $1000, go out to a nice dinner. If you save $10,000, maybe you can decide to get a new TV. The key here is not to deprive yourself of all luxuries, but instead think of luxuries as a reward for meeting other goals.
9. I’ll count on someone else to take care of this
No one else will take care of this. I suppose if your helicopter mom is going to stay alongside you through your entire life, maybe you can count on someone else. She can plan your saving, and investing. She can make all of your financial decisions for you. If you are like the other 99.9% of the population, you need to do it yourself. I kid you not. No one else is going to make sure your future self is well taken care of. It just doesn’t happen very often.
10. I spend money on things that give me immediate returns
Sure, hookers give you an immediate return (Besides the obvious STD’s), but I guarantee they won’t help your future self. Lots of things give you an immediate "return" but what does that mean, anyway? I struggle to think of any purchase you can make today, in lieu of saving, that will make you better off later. I suppose the one exception would be finding a Picasso at a garage sale.
11. I save in a 401k
You are saving in a 401k? GREAT!!! Is that all you are doing? Do you have any additional income that you can save in a ROTH IRA? How about funding a 529 plan for your children? How about investing in a brokerage account? There are lots of places to save additional money. Certainly investing in a 401k is a great first step in your savings plan.
12. I’ll work until I die. There is no need to save
My mother has always said she’ll work until she drops. Now that she’s 63 years old, she’s starting to change her tune. Luckily she has saved some in her 401k and also has real estate to help fund her lifestyle. My point here is that it’s easy to say you’ll work until you drop when you are young, but your future self may have a change of heart. Why not plan for a day that you can decide whether you want to stop working or not.
13. I will inherit some money
I’m sure you’ve met someone that doesn’t save at all because they are expecting to inherit some money from a relative some day. What if that relative loses all their money? They could be sued, come down with a nasty gambling habit, lose it all in a divorce. You get the picture. It’s probably a good idea to have a plan B. And what if you fall out of their good graces? Have they told you that you are going to receive X amount of money? Is it in a will? Any way you slice it, plan B’s are a great idea.
14. I’ve got plenty of equity in my house
Have you seen the real estate market lately? You have less equity than you used to. Even if you still have a significant amount of equity, in order to access that equity you’ll need to move. Sure there are reverse mortgages, but that isn’t necessarily the optimum financial arrangement. No matter how much you have tied up in your home equity, you should always have multiple types of investments to ride out the various economic crashes.
15. It’s so cheap to borrow money these days, that you would be a fool not to
I wonder who invented the saying "You’d be a fool not to borrow money when it’s this cheap". If you have to borrow money to buy a home, or another major purchase, sure it makes sense to borrow the cheapest money you can, but if the interest rate drives your purchases, then you probably have a problem. If crack cocaine is cheap, should you buy it? If toilet paper at Costco is half price, should you buy 10,000 rolls? For the average Joe, it makes the most sense to moderate your behaviors and just chip away at saving, paying down debt, and planning for the future regardless of how cheap money happens to be.